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Experts generally recommend maintaining a credit utilization rate below 30%, with some suggesting that you should aim for a single-digit utilization rate (under 10%) to get the best credit score.
But while this is a good guideline, it's helpful to put the "rule of thumb" into context with how much credit people are really using.
Below, Select shares how much credit the average person uses and why your credit utilization rate matters.
Credit utilization is at its lowest since 2009
Select asked representatives of twocredit bureaus,Equifax and TransUnion, for the data they had on average credit utilization rates.
According to an Equifax spokesperson, the average credit utilization as of June 15, 2020, is 19.2% — a historical low since Equifax began tracking the data in 2009.
Putting this into context is important: We're in the midst of a recession and global public health crisis. As millions of Americans are financially strained and banks have cut back on lending, it makes sense that people would be using less credit than ever in efforts to prevent going into debt.
Generally speaking, however, outside of the pandemic, Equifax leveraged data from Equifax Credit Trends intelligence tool to find that credit card utilization has remained between 20% and 22% of total credit limits since the spring of 2011, with seasonal variation. TransUnion had similar findings, reporting that the average credit utilization rate in Q1 2020 was 20.4%.
Here's why your credit utilization rate matters
Your credit utilization rate, also known as your debt-to-credit ratio, is an important factor that helps determine your credit score.
Shown as a percentage, it represents how much credit you use (your credit card balance) compared to how much you have available to you (your credit limit).
So, if you have an $800 credit card balance on your Chase Freedom® and you have a $2,000 credit card limit, your credit utilization rate is 40%:
($800 / $2,000 = 0.4 X 100 = 40%)
Your utilization rate matters because it makes up 30% of your FICO credit score. A good credit score can go a long way in helping you qualify for the best credit cards, such as the Blue Cash Preferred® Card from American Express for grocery rewards and the *Capital One Savor Cash Rewards Credit Card for entertainment rewards.
Before approving your credit application, lenders and creditors also look at your utilization rate to determine how much of a risk you are. A high utilization indicates that you could be a subprime borrower who may have trouble paying back a loan or credit card bill because you already have a lot of debt, whereas a low utilization rate illustrates you're able to manage credit responsibly.
Bottom line
No matter where your credit utilization rate stacks up against the average, know that the magic to a healthy utilization ratio is maintaining a low credit card balance and a high credit limit. The closer you can get to having a single-digit utilization, the better. Prioritize paying down your balances and once you've made a dent in your debt, you could considerasking for a credit limit increase.
*Information about the Capital One Savor Cash Rewards Credit Cardhas been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
FAQs
What Is a Good Credit Utilization Rate?
| Average Credit Utilization by Credit Range | |
|---|
| FICO® Score Credit Range | Average Credit Utilization Ratio |
|---|
| 670-739 (Good) | 35.2% |
| 740-799 (Very good) | 14.7% |
| 800-850 (Exceptional) | 6.5% |
2 more rowsNov 5, 2023
Typically expressed as a percentage, your credit utilization ratio looks at your current debt in relation to your total available credit. This shows lenders how much credit you're actually using. For example, a $2,000 balance on a single credit card with a $10,000 limit equals a credit utilization ratio of 20%.
Is 25% credit utilization good? ›
To maintain a healthy credit score, it's important to keep your credit utilization rate (CUR) low. The general rule of thumb has been that you don't want your CUR to exceed 30%, but increasingly financial experts are recommending that you don't want to go above 10% if you really want an excellent credit score.
What is the minimum credit utilization ratio? ›
If you are trying to build good credit or work your way up to excellent credit, you're going to want to keep your credit utilization ratio as low as possible. Most credit experts advise keeping your credit utilization below 30 percent, especially if you want to maintain a good credit score.
How do you calculate average credit utilization? ›
Take the total balances, divide them by the total credit limit, and then multiply by 100 to find your credit utilization ratio as a percentage amount.
What does low credit utilization mean? ›
Credit reporting agencies pay attention to your credit utilization ratio because it can indicate how well you have your finances under control. A low ratio suggests that your balance is manageable, while a high one suggests that you may be having a hard time paying your debts.
How much should I use if I have a 2000 credit limit? ›
What is a good credit utilization ratio? The Consumer Financial Protection Bureau (CFPB) recommends keeping your credit utilization ratio below 30%. So, if your only line of credit is a credit card with a $2,000 limit, that would mean keeping your balance below $600.
What does a 2000 dollar credit line mean? ›
A credit limit is the maximum amount of money a lender will allow you to spend on a credit card or a line of credit.
How much of a 200 dollar credit limit should I use? ›
How much should I spend on a $200 credit limit? The rule of thumb is to keep your credit utilization under 30%. That means if you have a $200 limit, you should aim to keep your total balance below $60.
Is having zero credit utilization bad? ›
Maintaining a 0% utilization rate on all your credit card accounts can help your credit scores, but you can achieve excellent scores without doing so. A low utilization rate, preferably under 10%, is ideal.
Every month, your card issuers report the balances on your credit cards to one or more of the three major credit bureaus — Experian, Equifax and TransUnion. This data then lands on your credit reports. When a new credit card balance is reported, the new level of credit utilization is what counts for your score.
How to get 800 credit score? ›
Making on-time payments to creditors, keeping your credit utilization low, having a long credit history, maintaining a good mix of credit types, and occasionally applying for new credit lines are the factors that can get you into the 800 credit score club.
How much should I spend if my credit limit is $1000? ›
How much should I spend if my credit limit is $1,000? The Consumer Financial Protection Bureau recommends keeping your credit utilization under 30%. If you have a card with a credit limit of $1,000, try to keep your balance below $300.
Is 1% a good credit utilization? ›
A lower credit utilization ratio is better for your credit scores, but a little utilization is better than none at all. As a result, the best revolving credit utilization ratio may be 1%. However, you don't need a 1% utilization ratio to have an exceptional credit score.
What is ideal credit limit Utilisation? ›
A good credit utilisation ratio is typically considered below 30% of your available credit. For instance, if you have a credit card with a credit limit of Rs 20,000, keep your balance below Rs 6,000 (30% of Rs 20,000).
What is the credit card utilization for an 800 credit score? ›
Generally, you want your credit utilization ratio to be 30% or less. For those with credit scores of 800 or higher, their average utilization ratio is 6.1%.
Is 10% credit utilization better than 30%? ›
A general rule of thumb is to keep your credit utilization ratio below 30%. And if you really want to be an overachiever, aim for 10%. According to Experian, people who keep their credit utilization under 10% for each of their cards also tend to have exceptional credit scores (a FICO® Score☉ of 800 or higher).
Will 50% credit utilization hurt me? ›
Using more than 30% of your available credit on your cards can hurt your credit score. The lower you can get your balance relative to your limit, the better for your score. (It's best to pay it off every month if you can.)
Is 55 credit utilization bad? ›
Experts traditionally recommend not using more than 30% of your available credit in a given month, and ideally keeping it closer to 10% or below. That's because to lenders, seeing a borrower put a lot of money on their credit card can be a red flag that they won't be able to pay back what they owe.
